Landlords are allowed to deduct a wide range of expenses, on top of mortgage interest costs, before they have to pay tax on their rental income. These allowable expenses include the cost of insurance, maintenance and repairs, utility bills, cleaning and gardening, and legal fees. Ordinary homeowners are not entitled to similar privileges.

The idea that “ordinary homeowners” do not enjoy the “privileges” of landlords in the tax system is wrong; in fact the opposite is true. Owner-occupation is slightly favoured over rental, since the imputed rent of the owner-occupier is tax exempt, whereas the actual rent received by landlords is taxable income. In addition, capital gains are taxed for landlords and tax exempt for owner-occupiers (with some minor caveats). That’s just taxation: the long list of direct government subsidies for residential mortgage lending surely further skew the balance of subsidy towards owner-occupation; an NAO report from March 2014 lists (Figure 2) six different schemes since 2006, and then we could move on to bank regulation, and so on.

The ONS estimates owner-occupiers’ imputed rent at £125bn in 2014, so perhaps a more accurate (though still nonsense) headline would be that homeowners receive a “£125bn subsidy” over landlords? I suppose that wouldn’t fit as neatly into the standard Guardian workers vs capitalists zero-sum narrative. I highly recommend Chapter 16 of the Mirrlees Review for a thorough discussion of land and property taxation.

The “Generation Rent” group (who claim to campaign on behalf of renters) seems to be firmly embedded in the long tradition of completely insane British housing market policy, proposing in their manifesto both rent controls and the extension of a weak form of “Right to Buy” to the entire private rental sector. They are a reliable source of silly quotes in any article about the housing market, this time coming up with:

“The tax system also puts landlords at an advantage over potential owner occupiers when competing for the limited supply of houses and it’s those thwarted first-time buyers who end up paying off the mortgage anyway in rents. “We need to stop subsidising property investment and use that money to build more homes instead.”

We need to stop subsidising investment in property… so we can invest more in property? A cunning plan.

A common view is that the UK economy is weak because “consumers aren’t spending”; a view often paired with the conclusion that, as Tim Harford says:

… who is going to do the spending when consumers start trying to save up? Krugman says it will have to be governments.

Leaving aside the question of why aggregate spending is undesirably low, this argument is somewhat misplaced, at least in the UK context.

The remarkable aspect of the UK household consumption data should be obvious from the following graph, which compares nominal household consumption spending with the corresponding volume measure (i.e. the measured quantity of goods and services purchased):

(This analysis comes with a metric boat-load of caveats. We can’t extrapolate from one sector – albeit a large one at 60% of GDP by expenditure – to the aggregates. “Spending” can mean consumption or investment, and I am looking only at consumption here.)

Caveats in place, this picture is not simply a lack of consumer spending, but in large part a failure of the supply side. UK households in 2012 Q1 are not measurably better off than in 2005 Q1, in terms of volume of goods and services consumed, for a 23% increase in spending over that period.

As Tyler Cowen notes, it is unsatisfactory to blame the 2008 Sterling devaluation for this. When imports became expensive, we should expect a boost to domestic production and substitution away from those imports. That does not seem to have happened.

I think the view of many would be to blame the banking system for failing to reallocate capital towards this this end. Can it really be that simple? The country home to the City of London is struggling to efficiently allocate capital? (Nick Rowe has just put up an interesting post on this very topic.)

I am no way susbscribing to demand denial, but it would be useful to at least attempt to understand some of the apparent supply-side failures present in the UK GDP data, and think about what policy implications they have.